Long term optimism for the medical device industry

Guo Shikai, Manager of Agricultural Bank Industry Growth and Agricultural Bank Industry Rotation Stock Fund

The medical device industry in the health service sector is a sub direction that we are optimistic about, and this sub sector will also be the investment mainline for a long time in the future. A basic logic of optimism about this industry is that as people's income levels rise, their demand for health services is also constantly increasing, and a large amount of social capital is constantly entering this field. With the increase of private hospitals, health centers, and rehabilitation centers, there will be a large demand for medical equipment.

1、 The industry is in the early stages of the industrial cycle. The social background of aging is the foundation for the growth of the health industry, and the resulting basic demand is the fundamental driving force for supporting the expansion of the industry market. According to the lifecycle of the industry, the development of medical devices lags behind that of drugs, and only began in the late 1990s. The entire industry is still in a small, scattered, and miscellaneous state. When the pharmaceutical industry has already seen the emergence of many well-known companies, the great development of the medical device industry has just begun. The output value of medical devices accounts for 43% of the pharmaceutical market size, while China only accounts for 10%. Therefore, in the long run, there is great potential for the future development of the medical device industry.

2、 The government holds encouraging policies for the industry. At present, the pharmaceutical industry is subject to policy interference such as price reduction and bidding, and the early life cycle nature of medical devices has led to policies still in a sweet period. Encouragement policies that can be enjoyed include medical insurance reimbursement, product research and development subsidies, and so on.

3、 The market for import substitution is vast. The Chinese equipment market started late, and the Chinese manufacturing attribute of emphasizing production over research and development has resulted in a significant gap between our company's technological strength and that of top tier manufacturers. But with the investment and progress of technology, the distance between mid to high end equipment, high-value consumables, diagnostic reagents, and other aspects of the domestic market is constantly shrinking, and import substitution in the domestic market is also ongoing.

4、 Incremental demand includes the demand for medical equipment from grassroots medical institutions, the demand for upgrading medical equipment from county-level hospitals, and the demand brought by the entry of social capital into the medical field. From the perspective of medical resource supply in our country, the growth rate of beds has significantly accelerated in the past decade, with a significant increase in the number and number of beds in medical institutions. This will inevitably bring about a demand for equipment expansion and upgrading.

Based on the above, we believe that the medical device industry is still in its own sunrise period, and the future industry space is huge.

Source: Phoenix Network